“Don't panic. The time to sell is before the crash, not after.” --John Templeton

CRACK CRUMBLE CRASH (May 17, 2021): There are all kinds of theories about why U.S. stocks reached all-time record overvaluations in 2021: the Fed, coronavirus, zero commissions, near-zero bank interest rates, and widespread popularity of trading. While these all have kernels of truth the real reason U.S. stocks are so overpriced is that investors poured more money into U.S. stocks during November 2020 through March 2021--just five months--than during the entire remainder of the bull market which had begun in March 2009:

Investors Have Put More Money into Stocks in the Last 5 Months Than the Previous 12 Years Combined

In addition to cleaning out their bank accounts and selling "boring" bonds so as to "not miss out" in the U.S. stock market, investors have borrowed all-time record amounts of money via margin loans as you can see from this chart of margin debt vs. GDP since 1959:

Downtrends have already begun for key leading sectors.

In any major bear market certain sectors tend to begin declines ahead of most other sectors. These tend to include small-caps (IWC), semiconductors (SMH), emerging market (EEM), and biotech (BBH). All of the above sectors had peaked weeks ago and have formed several lower highs since then. We also experienced the highest-ever ratios of insider selling to insider buying in U.S. dollar terms, a complete reversal from March 2020 when we had enjoyed the highest ratio of insider buying to insider selling since March 2009.

Notice the stark inversion from March 2020 to May 2021:

March 26, 2020: Executives Are Buying Stock in Droves, Giving a ‘Strong’ Signal That the Comeback Is for Real

May 14, 2021: Billionaires Are Selling Mega-Sized Stock Blocks After Surge

The following chart highlights how insider selling relative to insider buying has soared in recent months:

The media and analysts have shifted from expectations of essentially no inflation at the beginning of November 2020 to permanently-surging inflation by May 2021.

A half year ago the media, if they bothered to mention inflation at all, was about how it wouldn't be a problem for several years--if ever. In recent weeks inflation has been cited as one of the key factors in the global financial markets. It is almost certain that the media, along with most analysts and advisors, are just as wrong now as they were a half year ago but in the opposite direction. There is a long-term rising trend for inflation and interest rates worldwide which began in March 2020 but now that almost everyone is preparing themselves for higher inflation we are almost certain to move the opposite way for at least several months. Here is a refreshing contrarian viewpoint on this critical topic:

Greasing the Slide Toward Deflation

The insiders and commercials are clearly pointing the way forward while almost no one is paying attention to them.

Insiders of companies which would benefit from rising inflation, such as non-precious-metals commodity producers, industrials, and the shares of major global exporters, have experienced their highest insider selling in decades. At the same time we have all-time record traders' commitments in inflation-loving currencies such as the Canadian dollar in which commercials--who are the insiders for futures trading--have never been more aggressively net short:

Current Traders' Commitments, Canadian Dollar at Record 5-11-2021

It's a long way to Tipperary, not to mention the bottom for nearly all asset classes.

From its dividend-adjusted zenith of 104.99 on March 10, 2000 to its 17.22 bottom on October 10, 2002, QQQ plummeted 83.6%. With even greater net inflows by average investors and all-time record selling in 2021 by top corporate insiders it is likely that the current bear market for QQQ will end up experiencing similar or greater total percentage losses within three years or less. Hardly anyone is protecting themselves against such a possibility, which might even be the most probable scenario, by hedging, selling short, or even moving to a greater cash allocation. For the first time in history more puts were sold to open--that is, to make money betting on the stock market not declining much in percentage terms--than bought to open as a form of portfolio insurance. We have also experienced all-time record levels of small speculative call buying in 2021.

The total volume of short selling relative to market capitalization reached an all-time record low below 1.5% at the beginning of spring 2021:

The total percentage losses for unproven asset classes like cryptocurrencies and NFTs can't even be estimated, but the top-to-bottom declines for most of these will probably exceed 99%. Investors are far too easily swayed by well-known personages like Elon Musk rather than carefully considering the intrinsic merits of such speculations.

The bottom line: increasing negative divergences are pointing the way lower for U.S. equity indices in both the intermediate (3 to 6 months) and longer term (2 to 3 years) with periodic sharp upward spikes that are typical in all severe bear markets.

As the media have been maximally bullish and investors have smashed all previous net inflow records in their anticipation of higher asset valuations for U.S. stocks, corporate bonds, cryptocurrencies, real estate, collectibles, NFTs, and just about everything else, insiders and commercials and those with the most knowledge have never been more aggressive sellers. Do you think the world's wealthiest and most-experienced investors will be those who triumph over the next few years or the masses who have no idea what they are doing? There's a reason that the rich get richer and the poor remain poor. Otherwise we'd have mostly wealthy neighborhoods and a few scattered pockets of poverty rather than the other way around. It's not different this time.

Resist the temptation to become a rhinoceros, I mean a Boglehead, and remain heavily in cash.

It's time to hit an inside-the-park home run.

While you're patiently waiting for global assets to collapse you might enjoy watching a comedy I wrote in these euphoric times:

Inside-The-Park Home Run

Disclosure of current holdings:

Each time QQQ has been near or above 340 I have gradually increased my short position in that fund which had plummeted 83.6% from its January 10, 2000 top to its October 10, 2002 bottom including all reinvested dividends and will likely experience a similar top-to-bottom loss by 2024 or sooner.

Here is my asset allocation with average opening prices adjusted for all dividends: 57.0% cash including TIAA Traditional Annuity paying 3% to 5% (only available for legacy retirement accounts) and Discover Bank high-yield savings paying 0.40% (available for all U.S. residents with retirement and ordinary savings accounts); 18.4% short XLK (112.7737); 16.8% long TLT (148.59); 12.3% short QQQ (296.3402); 7.4% short TSLA (494.9721); 4.5% long GEO (7.898); 1.9% short ZM (293.16); 1.4% long GDXJ (44.6462); 0.9% short AAPL (125.5481); 0.6% short IWF (223.0119); 0.5% short SMH (170.7813). It doesn't add up to 100% since short positions require less cash; there is no margin involved.

“Investors should always keep in mind that the most important metric is not the returns achieved but the returns weighed against the risks incurred.” --Seth Klarman

SLASH TRASH, STASH CASH (August 2, 2020): The last seven months have featured wild market swings in both directions. At the start of 2020 investors were willing to take absurdly high risks in nearly all assets, being far more concerned about missing out on additional gains than they were about the danger of losing money. During the third and fourth weeks of March 2020 we experienced the two biggest-ever weekly net outflows from U.S. equity funds in their entire history, smashing the previous marks from early 2009 and previous panics. By early June most people had once again become irrationally euphoric, so in my update from that time I recommended heavily selling most securities except for gold mining and silver mining shares which were still in strong uptrends. After a brief pullback which provided buying opportunities for energy shares during the second week of July, we currently have renewed intense irrational exuberance which has spread to precious metals, so last week I unloaded all of my shares of GDXJ, GDX, SIL, SILJ, and related funds and kept only my coins. At the end of the week in response to absurd bullishness regarding mega-cap U.S. technology shares, I significantly increased my short position in XLK to 8.5% of my total liquid net worth and will add more this week if the excitement continues. I now have more shorts than longs and the most cash since February 2012--roughly 5/6 of my total liquid net worth.

VIX kicks.

VIX has been the most consistently reliable indicator throughout the decades in telling us when to buy and when to sell. During the past several weeks VIX has tried repeatedly to slide into the low 20s and has repeatedly failed to do so, with the most recent attempt on Friday, July 31, 2020 when it dropped to 23.55 at 9:06 am. Eastern Time. Sooner or later VIX is going to surge higher and double or triple, although it will not likely surpass its March 18, 2020 top of 85.47. As this is happening most risk assets worldwide are going to suffer much greater percentage losses than most investors are currently anticipating. Hardly anyone has been hedging or establishing short positions in the false belief that the global economy will prosper once the coronavirus is cured. Paradoxically, the sooner there is a proven vaccine and/or cure for the coronavirus, the more rapidly we will experience a severe bear market because there will be nothing to look forward to except huge worldwide deficits and a persistent slowdown in global economic and profit growth.

Tech dreck.

The total market capitalization for U.S. equities is now roughly twice the total U.S. GDP for the first time in history, surpassing its previous all-time record of 1.87 from March 2000 (source: Randall Forsyth in Barron's from August 3, 2020). U.S. mega-cap technology shares are more overvalued than they had been during the end of 1999 and the beginning of 2000 which had been their previous absurd peaks. It should be remembered that the Nasdaq had plummeted 78.4% from its March 10, 2000 top of 5132.52 to its October 10, 2002 nadir of 1108.49 so we are almost certainly setting up for a repeat performance. Adjusted for earnings and inflation the Nasdaq could drop even more over the next few years than it had done during its historic collapse at the beginning of this century. Just as in early 2000, 1929, and early 1973, the market's most-popular companies are especially overpriced. As they regress toward the mean, they are so heavily owned by index funds and trillions of dollars of managed money that this by itself could push the worldwide economy into a recession in another year or so.

Dollar holler.

On Friday, July 31, 2020 the U.S. dollar index slid to a 2:49 a.m. bottom of 92.546 which marked its most depressed point since May 2018, after which it began to tentatively rebound. The U.S. dollar has entered what appears to be a well-entrenched downtrend, so as it reverses sharply higher along with VIX it is likely to surprise and confuse most investors who are expecting additional greenback weakness. The Russell 2000 is revealing the truth: following its all-time top of August 31, 2018 the Russell 2000 has made lower highs in January, February, June, and July. This means that the real U.S. stock market, not counting the biggest and most-popular names, has been in a downtrend for nearly two years. The longer a U.S. equity bear market continues the more frequently we will experience severe corrections such as the one we had suffered in February-March 2020. Lots of people think that was a one-time event "caused by" the coronavirus but it was merely a continuation of a series of corrections including the drop of more than 20% for the S&P 500 Index over a period of more than three months in September-December 2018. Most likely the next three to five months will be accompanied by a drop of at least 20% for all U.S. equity indices and potentially much greater losses by the time the next intermediate-term bottoming patterns are completed.

Gold cold sold.

Have you noticed recent frequent upside price projections for gold these days? Near the end of 2015 and the start of 2016 nearly all analysts were talking about not if, but when gold would drop to 1000 or 800 or 600 or 300 U.S. dollars per troy ounce, with no one talking about gold recovering to 1200 or 1300 which of course is what it did. Now we see repeated guesses as to when gold will reach two thousand, 2500, 3000, 5000, ten thousand, and so on, with hardly anyone suggesting that it might drop to 1800 or 1700. Any very overcrowded trade is always very dangerous regardless of fundamentals.

More importantly, the most reliable leading indicator for gold is its behavior relative to GDXJ and other funds of gold mining shares. When gold first touched 1970 U.S. dollars per troy ounce just before the end of the after-hours session on Monday, July 27, 2020, GDXJ had its last trade of the day at 64.18. On Friday the last trade just before 8 p.m. Eastern Time for GDXJ was 60.25 and that was with gold bullion just above 1975. When higher gold prices are met by lower highs for GDXJ then this is almost always followed by a substantial pullback for the entire sector. It works the opposite way also: when gold bullion keeps dropping while GDXJ resists repeated pullbacks then a rally is usually closely approaching.

The most bearish behavior would be gold actually reaching or closely approaching 2000 while GDXJ keeps forming lower highs.

Sweep creep deep.

There is no guarantee that Democrats will sweep the U.S. House of Representatives, the Senate, and the Presidency on November 3, 2020 but such an outcome has become increasingly likely. Just as in 2008, a Democratic sweep will cause many investors to become fearful of the future. Such a sweep could lead to the U.S. corporate tax rate climbing to roughly 28% (it was lowered from 35% to 21% at the end of 2017) as well as the SALT limitations being repealed and likely significantly higher marginal tax rates for wealthier U.S. residents. Once investors realize simultaneously that long-term capital gains rates are likely to rise sharply on January 1, 2021, investors will rush to lock in currently unusually-low rates during the final weeks of 2020. Combined with tax-loss selling for some of the biggest 2020 losers and disappointment by Robinhood investors that it's not as easy to make money as it looks, we could experience a multi-month decline which doesn't end until the final weeks of 2020 or perhaps in early 2021 followed by the next bear-market rebound.

House louse.

Real-estate prices have rebounded from their sharp March 2020 selloffs partly since 30-year U.S. fixed mortgage rates had briefly dipped below 3% and partly since the coronavirus has caused unusually low inventory, plus the U.S. stock-market rebound has likely engendered overconfidence in many other assets. As U.S. equities and corporate bonds retreat in value, residential inventory is likely to progressively increase as people sell houses to raise cash. The process of falling real-estate prices is likely to accelerate in 2021-2022 and perhaps beyond, with the primary reason in 2021 being an unexpectedly large rise for mortgage rates as both inflation and interest rates surprise everyone including the Fed with their resurgence. 2022 is likely to bring a worldwide recession and the lowest stock-market valuations in more than a decade, both of which will exert additional downward pressure on housing prices. Many people don't realize that, according to Robert J. Shiller in a New York Times article from earlier today (July 31, 2020), inflation-adjusted U.S. home prices soared 45% from February 2012 through May 2020. This increase is entirely artificial, helped by new U.S. government rules to allow nearly anyone with a good credit rating to buy nearly any house with zero down payment or closing costs which are financed along with the house itself. Real U.S. housing prices slid 36% from December 2005 through February 2012 (source: the same NYT article) so some kind of repeat performance is likely. Houses are no longer as "safe as houses": in the age of the internet they fluctuate sharply in both directions just like stocks, bonds, collectibles, and everything else. It's a small world after all.

The bottom line: get heavily into cash now to minimize your potential losses for the remainder of 2020 and to have plenty of buying power for what will likely become numerous compelling bargains.

Investors tend to be too heavily committed too much of the time, thereby making it impossible to fully take advantage of true bargains such as we had experienced in March 2020. Since the Russell 2000 and most baskets of small- and mid-cap U.S. equities have been in downtrends since August 2018, we are likely to experience several more major corrections over the next few years. You can often make more money in a U.S. equity bear market by making opportunistic purchases near all intermediate-term bottoms than you can by selling short on the way down, although it also makes sense to be short funds like XLK and QQQ or if you have a retirement/cash account to buy something like PSQ which will have inferior returns to selling short directly but which is taxed more lightly in some jurisdictions including Canada. I had recommended holding onto gold mining and silver mining shares two months ago but now those should be sold also.

Disclosure of current holdings:

From my largest to my smallest position I currently am long the TIAA-CREF Traditional Annuity Fund, bank CDs, money-market funds, Discover Bank Savings paying 0.95% (mostly new), I-Bonds, XES, MTDR, PSX, CDEV, WTI (all energy shares purchased in the second week of July 2020), GEO, BCBP, OPBK, SONA, KRNY (continuing to purchase regional banks into weakness). I have 5.0% of my total liquid net worth in the previously-mentioned energy securities, 3.5% in the regional banks I listed, 1.5% in GEO, and am otherwise completely sold out of everything else on the long side.

I have 8.5% of my total liquid net worth short XLK, 4.0% short TSLA, and 1.5% short ZM. I plan to keep adding especially to my XLK short into strength whenever XLK is near 110 or above. My cash and cash equivalents including bank CDs, savings/money-market accounts, I-Bonds, stable-value funds (fixed principal, variable interest) comprise 83.3% of my total liquid net worth, my highest percentage total since February 2012. (It seems to exceed 100% but for short positions only part of the total cash value is required to hold them.)

"Those who cannot remember the past are condemned to repeat it" (George Santayana). "Those who can remember the past but insist that it's different this time deserve to repeat it" (Steven Jon Kaplan).

The two previous longest bull markets in U.S. history occurred as follows: 1) from August 1921 through September 1929 which was followed by a bear market of over 34 months from September 1929 through July 1932; and 2) from October 1990 through March 2000 which was followed by a bear market of 30-31 months in duration (exactly 31 for the Nasdaq). The longest-ever bull market which began for the S&P 500 on March 6, 2009 and which may have ended for that index on February 19, 2020 might therefore last for 30-36 months which implies a major bottom somewhere near the end of 2022. The bear market for the Russell 2000 and many other small- and mid-cap U.S. shares began on or around August 31, 2018 and has therefore been intact for nearly two years with several key lower highs along the way.

Friends don't let friends become overinvested.

“When your views are truly contrarian they are inevitably uncomfortable. Courage and the ability to withstand pain are required.” --Michael Steinhardt

STEADILY SELECT SPLATTERED SECURITIES (March 29, 2020): A useful analogy to a bear market is to imagine that several dozen people carry buckets of brightly-colored paint up to various floors of a skyscraper and then simultaneously pour their buckets onto the street. The buckets which were carried to the highest floors will generally splatter more aggressively than buckets from lower floors but it will be a messy correlation rather than a clean linear pattern. In other words, some of the paint from floors which are not at the very top will end up splattering worse than some of the paint from higher floors due to the unpredictability of nature. The same is true of bear markets: the most overpriced assets will generally suffer but some undervalued assets and others which "shouldn't have" dropped so much will do so anyway. Because most investors aren't accustomed to trading in bear markets, especially now when we haven't experienced such a downtrend for eleven years, most people will be acting from confusion rather than with advanced planning. Even an inferior method is better to acting randomly or using emotions.

The weekly timing of the selling signals that the least-experienced investors are doing the most selling--which is when you should be doing your heaviest buying.

When do ordinary inexperienced investors sell? Definitely not at 11 a.m. on a Wednesday since they're busy working at that time. Most inexperienced people place market sell orders on non-trading days when they have time to do so. We saw this clearly in December 2018 when during the weekend prior to December 24 many investors sold in a panic with their orders being filled at the open that day, which triggered sell stops that led to additional losses. Investors had all of Christmas Day to place more market sell orders which were filled near the open on Wednesday, December 26, 2018 which triggered a final round of stop-loss selling followed by one of the biggest one-day rebounds in history the same day.

Do the opposite of the weekend warriors and follow the Nikkei 225 futures especially on Sunday evenings.

Nearly identical behavior has been occurring in recent weeks when ordinary investors have placed market sell orders during most March weekends which are filled at the open on Monday followed by stop-loss orders being triggered by those lower prices. The market then mostly recovers later in the week, only to experience the same behavior the following weekend. If you look back at the first quarter of 2009 then we had another instance of the same phenomenon. This kind of action has been true for decades. Experienced traders will do extra buying near the opening bell each Monday and on other days following non-trading days (like December 26, 2018) whenever fear is elevated.

Sometimes U.S. futures are trading limit down which makes it impossible to track how the global markets are behaving. Ignore the U.S. futures especially on limit down days and watch the Nikkei 225 futures which don't have limit-down restrictions. On Sunday evening, March 22, 2020, Nikkei 225 futures opened down about 11% and were down only 3% a few hours later, indicating that U.S. stocks would probably open lower but that better times probably were ahead. As I am writing this on Sunday evening we have similar albeit less exaggerated moves as Nikkei futures opened moderately lower and are now slightly positive. The exchanges' suspending trading during volatile moves is idiotic since most investors get especially nervous during trading halts. Some of my lowest purchase prices were achieved from fills which occurred within a few minutes of trading being resumed after an artificial halt.

When many investors and chartists are selling while top executives have been doing their heaviest buying since the last bear-market bottom in March 2009 then you know you should be gradually buying into weakness. Never chase after any recent trend.

Many ordinary investors have been confused by the market's recent plunge and have been either not buying into weakness or actually selling. Technical traders have been hit even harder by repeatedly chasing after short-term trends which usually reverse just after they are "confirmed." Do as the insiders do and gradually purchase whatever is most undervalued using ladders of good-until-canceled orders. Some of the best bargains have existed only for minutes or even for seconds on some especially-volatile trading days, so if you are trying to buy using market orders you are unlikely to succeed in getting the most-favorable prices. The ideal approach is one I use even in calmer markets: place ladders of very small orders of equal-dollar amounts which are spaced equally apart and which go very deep so the market never goes below the lowest rung in your ladder. It is better to buy very tiny amounts at truly compelling prices then to try to magically guess where you will profit from lump-sum trading.

When unusually heavy insider buying is combined with all-time record selling by inexperienced investors then that serves as an even stronger buy signal.

The best time to sell is when we have heavy insider selling combined with intense buying by the least-experienced investors; this is why I was steadily selling near the end of 2019 and the beginning of 2020. Now we have an even stronger buy signal due to all-time record selling by the least-experienced participants in the financial markets:

Funds and ETFs Witness Record-Breaking Outflows During the Week

A surprising number of stocks and bonds recently traded at or near multi-decade lows.

Bear markets are notorious for their capriciousness and usually end up erasing a significant percentage of the gains which had been achieved in recent bull markets. When U.S. equity indices had bottomed in early March 2009 they didn't just give up their gains since 2007 or 2006 but fell to 12-1/2-year lows for the S&P 500 which meant their cheapest prices since 1996 without adjusting for inflation. If you adjust for inflation then stocks in early 2009 had returned all the way back to their levels from the mid-1980s. Recently many traded shares fell to prices not seen since the early years of the 21st century or in some cases in a few decades without even adjusting for inflation. This has created compelling buying opportunities for those who have been alert to recent bargains while highlighting that the Boglehead approach of buying no matter how overvalued the stock market is doesn't work in the long run.

Those who bought U.S. stocks in August 1929 lost half of their money in inflation-adjusted terms if they held them for 53 years until August 1982.

There is zero political resistance to endless stimulus and literally printing money as rapidly as possible.

It is almost impossible for those who believe in restraining deficit growth to be seriously considered nowadays since the popular mood is for governments around the world to "do something about" the economic contraction caused partly by the severe restrictions required to fight the spread of coronavirus. The U.S. just passed a two-trillion-dollar stimulus package, the U.S. Fed is taking extraordinary action in other aspects, while governments worldwide are acting similarly even where they have a long history of being more subdued and conservative. This will have profoundly inflationary implications which aren't generally being considered by many investors except for insiders. Top corporate executives have been doing their heaviest buying in many companies which will benefit from rising inflationary expectations and massive global stimulus.

Housing prices have been collapsing but almost no one knows about it unless they are in the industry.

It is pretty clear why homebuilders and those who wish to sell real estate aren't eager to have it widely known that the much-publicized collapse for financial assets around the world has been accompanied by equally dramatic but mostly hidden losses for both residential and commercial real estate. REITs have plummeted but so many sectors have done likewise that this is often overlooked. Due to the coronavirus there aren't the usual selling procedures like open houses (scheduled public viewings) or even the ordinary procession of buyers meeting sellers. Most people naively believe that housing prices are remaining relatively flat. As wealth has evaporated worldwide this must inevitably lead to significantly lower prices for real estate, and since downturns for real estate usually last for a few years or more the pullback will likely continue for at least three years. If you are able to sell then do so as soon as possible, while if you have been considering doing any buying then I would strongly recommend waiting at least until 2023 before taking action.

The timing of lower highs will be of major significance in the U.S. elections scheduled for November 3, 2020.

Nearly all bear markets are notable in the way in which they form lower highs. The Russell 2000, consisting of companies 1001 through 3000 by market capitalization out of all 3600 U.S.-listed companies, topped out on August 31, 2018, formed a key lower high on January 17, 2020, and recently plummeted so deeply that it was recently trading below its levels from the final months of 2013. This wasn't widely reported in the mainstream financial media but it is immediately obvious on a long-term chart. We have likely begun a powerful rebound for risk assets around the world which will have major implications for the U.S. Presidential, Senate, and House of Representatives elections scheduled in just over seven months. If the S&P 500 and similar U.S. equity indices are completing important lower highs with the S&P 500 near three thousand around Election Day then Donald J. Trump has a good chance of being re-elected while the Senate will likely remain with Republicans holding a majority. On the other hand, if the current rebound stalls around some other time like Labor Day (September 7, 2020) and thereafter falls sharply then we could experience a meaningful shift toward the Democrats. During the 2007-2009 bear market there was a major plunge which began near the opening bell on the day after Labor Day which made it far easier for Democrats to sweep that year; during the 2000-2002 bear market there was an important top also around Labor Day of 2000 followed by a moderate pullback which may have made it possible for George W. Bush to squeak by in a disputed contest.

The media often discuss how the results of the U.S. elections will impact the markets but it is probably even more significant to consider how the markets will impact the elections. If Democrats regain both the U.S. Presidency and the Senate, and retain control of the House of Representatives, then significant tax and other legislative changes will become nearly certain for 2021 which could persist for several years or more.

Insiders have been buying at their most aggressive pace since March 2009.

The ratio of insider buying to insider selling reached its highest ratios since February-March 2009 with the following article discussing this topic:

Executives Are Buying Stock in Droves

Top corporate executives aren't permitted to sell the shares they purchase until at least six months after the date of purchase or else they have to surrender their gains. This means that they have not been buying simply in anticipation of a brief sharp recovery but are looking for a more sustained rebound.

Insider buying has not been uniform across sectors. Especially-undervalued securities in energy and travel are among those which have experienced multi-decade peaks of insider accumulation during the past few weeks.

TLT has been forming lower highs since the pre-market session on March 9, 2020, while VIX revisited the mid-80s multiple times two weeks ago and completed a significantly lower high when most major U.S. equity indices slid near the opening bell on March 23, 2020.

TLT, a fund of long-dated U.S. Treasuries, topped out at 181.41 three weeks ago on March 9, 2020. You won't find this number on your charts unless you use data which includes trading outside of regular hours since this top had occurred in the pre-market session at 7:56:29 a.m. Eastern Time. Meanwhile, VIX peaked several trading days prior to the March 23, 2020 bottom for the S&P 500, the Nasdaq, and many large-cap U.S. equity indices. This implies that the most-experienced investors who tend to purchase long-dated U.S. Treasuries and portfolio insurance became less eager to hedge at the same time that most ordinary investors were becoming increasingly nervous about their portfolios. This is analogous to the market's behavior in early 2009 prior to one of its strongest-ever ten-month uptrends from early March 2009 through early January 2010.

Summary: buying now will likely be profitable especially because we remain in a bear market for U.S. equities which began when the Russell 2000 topped out on August 31, 2018. Buying near the end of 2018 was highly profitable and buying in recent weeks will likely prove to be even more rewarding.

If you buy near an intermediate-term bottom during a bull market you will usually come out ahead. If you buy near an intermediate-term bottom during a bear market, especially when insiders are buying at their most intense pace in eleven years and in some sectors at all-time record levels, you will achieve greater annualized gains since bear markets tend to be far more volatile than bull markets in both directions. Those who bought in the final months of 2018 were well rewarded especially if they sold in late 2019 and early 2020. Similarly, those who have been buying the least-popular securities in recent weeks into the coronavirus panic and who keep buying into pullbacks will likely enjoy even greater annualized gains during some unknown period of months.

The bottom line: with all-time record investor outflows you know it must be worthwhile to be doing the opposite.

The most-experienced investors are doing their heaviest buying in eleven years while the least-experienced investors are doing their most panicked selling in eleven years. You don't need an advanced degree to figure out which side will come out ahead, and since we are in a long-term bear market the upcoming gains will likely occur surprisingly quickly. Whenever most people you know become excited about "getting back into the market" and insiders are unloading then it will be time to get out again.

Disclosure of current holdings:

From my largest to my smallest position I currently am long GDXJ (some new), the TIAA-CREF Traditional Annuity Fund, SIL, XES (some new), ELD (some new), FCG (some new), OIH (some new), PSCE (some new), bank CDs, money-market funds, GDX, I-Bonds, SCIF, MTDR (some new), URA (some new), PAK, EPOL, ECH, COPX (some new), REMX (some new), XOM (all new), PEO (all new), EZA (all new), GXG (all new), FXF, GREK (all new), EWW (all new), GNK (all new), EGLE (all new), IPI (all new), SBLK (all new), SALT (all new), FLNG (all new), EGPT (some new), GOEX, BGEIX, NGE, FXB, XOP (all new), CCL (some new), BA (all new), AA (some new), IDX (some new), EWM, RGLD, WPM, SAND, SILJ, KLXE (all new), and CHK. I am completely sold out of U.S. Treasuries, HDGE, SEA, SLX, ASHR, ASHS, TUR, FM, ARGT, RSXJ, LIT, EWU, EWG, EWI, EWD, EWQ, EWK, EWN, WOOD, EPHE, JOF, and AFK.

I have closed out all of my short positions which I will generally do whenever VIX reaches a multi-year peak. The only securities I would sell short now would be long-dated U.S. Treasuries and their funds including TLT. I would sell short actual houses if there were a way to do so. My cash and cash equivalents including bank CDs and stable-value funds (fixed principal, variable interest) comprise 17.7% of my total liquid net worth.

"Those who cannot remember the past are condemned to repeat it" (George Santayana). "Those who can remember the past but insist that it's different this time deserve to repeat it" (Steven Jon Kaplan).

The two previous longest bull markets in U.S. history occurred as follows: 1) from August 1921 through September 1929 which was followed by a bear market of over 34 months from September 1929 through July 1932; and 2) from October 1990 through March 2000 which was followed by a bear market of 30-31 months in duration (exactly 31 for the Nasdaq). The longest-ever bull market which began for the S&P 500 on March 6, 2009 may have ended for that index on February 19, 2020. This historical evidence suggests that the current bear market for the S&P 500 could last for 30-36 months which implies a major bottom for U.S. equity indices somewhere near the end of 2022.

The heaviest insider buying since March 2009 combined with all-time record investor net selling and repeated pullbacks near the opening bell worldwide especially on Mondays is likely signaling a major uptrend for most global risk assets. Keep steadily buying the most undervalued stocks and bonds and don't sell again until VIX is back down to the mid-teens. Some commodity-related and emerging-market securities may have begun major uptrends with triple-digit percentage gains while some individual shares have already doubled from their recent deep nadirs.

“To buy when others are despondently selling and to sell when others are avidly buying requires the greatest of fortitude and pays the greatest ultimate rewards.” --John Templeton

INFLATION'S GYRATIONS (December 4, 2019): When I wrote my last update on August 7, 2019--I will try not to wait so long before the next one--the media were obsessed with the inverted U.S. Treasury curve, the insistence that we were headed for an imminent recession, and the "certainty" of continued all-time record low long-term U.S. Treasury yields. Practically all that anyone debated in August was when a U.S. recession would arrive and how much lower long-dated U.S. Treasury yields would drop as a result. After falling to all-time lows on August 28, 2019, yields on the 10-, 20-, and 30-year U.S. Treasuries have been rebounding. All of a sudden almost no one is worried about a U.S. recession any more. The 4-week U.S. Treasury no longer has anywhere near the highest yield in the entire Treasury curve as had been the case in the late summer.

Investors have shifted within four months from an obsession with recession to an even more absurd overconfidence in ever-rising U.S. asset valuations.

During recent weeks we have experienced some of the most intense net exchange-traded fund inflows in history along with rare extremes of optimism in surveys which date back several decades. Daily Sentiment Index on Wednesday, November 27, 2019, the date of the exact top for the S&P 500 and the Nasdaq and even the Dow Jones Industrial Average, showed 89% of futures traders who were bullish toward the S&P 500 and 91% who were bullish on the Nasdaq Composite Index--and only 26% bulls toward gold. On the exact day when I had written my last update on this site on August 7, 2019, the American Association of Individual Investors (AAII) reported only 21.7% of investors who were bullish toward U.S. equities while 48.2% had been bearish. 2019 year-to-date net inflows for U.S. exchange-traded funds set a new all-time annual record with several weeks to go, surpassing last year's peak which had been the previous high-water mark by a wide margin. Investors who shunned U.S. equities by making substantial net outflows when the S&P 500 had been below one thousand in 2008-2009 have since been making massive net inflows with the S&P 500 near and above three thousand. Selling low and buying high, as usual, is unfortunately what usually occurs in real life. After an extended pullback assets look the most dangerous whereas they are actually the safest and most rewarding. Buying an asset after it has already gained 373% (from 666.79 on March 6, 2009 to 3154.26 on November 27, 2019) will tend to be considerably less profitable than buying it before it has done so. Psychologically an asset which has been climbing for more than a decade appears to exude superiority and safety when it is maximally dangerous to be long. Conversely, an asset which has suffered an extended decline as energy shares have done during the past two years makes it seem to be intrinsically inferior and dangerous when it is maximally safe and rewarding.

Small- and mid-cap U.S. companies are continuing to resist all attempts to regain their 2018 zeniths.

Throughout 1929 small- and mid-cap shares mostly never reached their highs from 1928 even while large-cap shares mostly did so; U.S. stocks thereafter suffered their worst percentage losses in history. Throughout 1972 and into January 1973 U.S. small- and mid-cap shares couldn't recover their 1971 highs while the largest-cap "Nifty Fifty" names kept climbing; this was followed by the biggest stock-market plunge since the Great Depression. Very few investors know or care that the New York Composite Index which has existed for decades has still not regained its January 26, 2018 top, while the Russell 2000 has not set a new all-time high since August 31, 2018. The most severe bear markets in U.S. history all have in common an extended period of underperformance by smaller and medium-sized companies relative to their large-cap counterparts. The markets are telling you loudly and clearly what is going to happen next; all you have to do is respect history and listen.

The U.S. dollar index climbed to its highest point since May 2017 and has begun a major multi-month decline.

The U.S. dollar index completed a top of 99.667 on the first trading day of September 2019 which was nearly regained on the first trading day of October. Until it had recently been surpassed by speculative bets on higher U.S. asset valuations the most overcrowded trade worldwide was betting on a stronger U.S. dollar versus nearly all global currencies. The theory was that the U.S. economy, while far from perfect, was the cleanest dirty shirt in the laundry. This is a badly soiled theory which relies heavily on the spin cycle, since the only thing truly dynamic about the 2%-growth U.S. economy has been its outperforming U.S. assets. Whenever any sector outperforms investors tend to invent nonexistent reasons for its having done so along with projections of unending future gains; recent extended losses will lead to nonsensical explanations about "why" any asset has retreated and why it will keep dropping in price. No one wants to admit that something has become far above or far below fair value just because herds of stupid investors have been irrationally crowding into or out of any given asset.

Energy shares remain compelling bargains with most of them having dropped by more than half since their respective January 2018 highs.

Energy shares not only went strongly out of favor but have had among the greatest losses of all sectors since their respective January 2018 peaks and are even farther below their elevated highs of June 2014. Most energy shares have lost more than half their value within less than two years. Exchange-traded funds in this sector which I have been gradually buying at first into lower lows and during the past two months into higher lows include all of the following: XES (oil/gas equipment/services), FCG (natural gas producers), OIH (oil services), and PSCE (small-cap energy). PSCE has slid from its June 2014 top by (53.37 - 5.95) / 53.37 or more than 88.8% which makes it among the worst-performing non-leveraged funds in any category over the same time period. This is because both energy and small-cap shares are simultaneously out of favor, making this a rare double play on these unpopular concepts. Other funds in this sector include RYE (equal-weight energy) and IEZ (oil equipment and services). All of the above funds have been forming higher lows for various periods of time. Before assets rally sharply higher they almost always discourage investors by creating a bottoming pattern consisting of a deep nadir followed by a sequence of progressively higher lows. Instead of being encouraged by the higher lows, investors perceive these as a sequence of failed rallies, and therefore often end up doing net selling when they should be gradually buying into all higher lows.

One worthwhile individual energy name is MTDR (Matador Resources). This little-known company is geographically surrounded by two large giants which might eventually initiate a takeover. Even if that takes years to occur, insiders including CEO/founder Joe Foran have been persistently buying near and below 14 dollars per share including the past several trading days.

I have sold most of my developed-market equity funds and a modest percentage of some emerging-market equity funds if they have a strong positive correlation with U.S. equity indices.

We are likely in a period where U.S. assets including U.S. equity indices will mostly experience corrections exceeding 20% over the next several months. During the same time interval the U.S. dollar will usually be retreating. I have been selling a large percentage of the Western European, Japanese, and related securities which I had mostly purchased at depressed prices when they progressively slid toward their Christmas 2018 bottoms. Often I have been selling these on the exact days when they have achieved favorable long-term capital gains or shortly thereafter. The stronger their positive correlation with U.S. assets, the more essential it has been to keep selling these into strength--especially into all sharp short-term rallies.

I had also bought many emerging-market securities which had mostly bottomed in October 2018 and made higher lows in December 2018. I have retained assets such as PAK, GXG, ECH, ARGT, along with my funds of commodity producers and related assets such as GDXJ, COPX, and REMX--and anything where a falling U.S. dollar will have a much more positive impact than the negative drag of sliding U.S. assets.

Investing Tip #1: respect insider activity.

In each update starting today I will include a fundamental concept of my investing strategy which is a combination of value and behavioral methods. I try to combine the best ideas of value giants including Benjamin Graham, John Templeton, Seth Klarman, and Ray Dalio, along with behavioral concepts from Howard Marks, Daniel Kahneman, Amos Tversky, and Gerd Gigerenzer. I gladly steal others' ideas since they are so often better than my own.

Top executives, especially those in certain companies, tend to have a proven track record of far outperforming median investors. One key reason is that they know exactly what is going on with their companies so if they are buying their own company's stock with their own money it must be meaningful. Another reason is that insiders are classic value investors. They don't fret about the concerns of amateur investors such as what will happen next week, what the media are saying, whether they are buying "at the bottom," or their average purchase price. They don't do lump-sum trading: they keep gradually buying when valuations are the most in percentage terms below fair value while gradually selling when prices are the most above fair value. Insiders couldn't care less whether they are raising or lowering their average purchase price. They don't do swing trading, don't use stops, and could care less about breakouts or moving averages. Investors would be wise to follow their example.

Insider activity is the most meaningful when numerous executives of different companies within a single sector are simultaneously buying or selling in unusually intense total U.S. dollar volume. During the past half year energy executives have smashed all-time records of insider buying including their aggressive gradual accumulation during the past several trading days.

Summary: the two most irrational extremes today are 1) underpriced energy shares and 2) overpriced U.S. assets.

When I wrote my last update investors were illogically obsessed with an imminent recession and had zero fear of inflation. Today recessionary concerns have almost disappeared but investors still don't realize that inflationary expectations are set to sharply surge higher. Investors have become dangerously complacent about the downside risks for U.S. assets, being far more afraid about missing out on future gains for U.S. equity indices than they are about the possibility of losing money. As always, capitalize upon investors' herding behavior by acting before they realize what is really going on.

The bottom line: keep buying energy shares into additional higher lows while selling U.S. assets into lower highs.

Tax-loss selling has been especially rough on energy shares and could potentially continue through the end of December 2019. Meanwhile, investors encouraged by their 2019 gains will periodically create upward surges for U.S. assets including equity index funds, high-yield corporate bonds, and related assets. Keep buying energy shares into higher lows and selling U.S. assets into rallies.

Disclosure of current holdings:

From my largest to my smallest position I currently am long GDXJ, 4-week U.S. Treasuries yielding 1.649%, the TIAA-CREF Traditional Annuity Fund, SIL, XES (some new), ELD (some new), FCG (some new), SEA, SCIF, OIH (some new), PSCE (some new), ASHS, GDX, VNM (some sold), ASHR (most sold), bank CDs, money-market funds, GXG, I-Bonds, URA, SLX, PAK, EPOL, EZA (some sold), ECH, LIT, HDGE, TUR (some sold), FM (some sold), EPHE (some sold), MTDR (some new), EGPT, REMX, FXF, COPX, WOOD, ARGT, GOEX, BGEIX, NGE, EWW (some sold), AFK, RSXJ, FXB, EWM, GREK (some sold), EWG (most sold), EWU (most sold), EWI (most sold), JOF (most sold), EWD (most sold), EWQ (most sold), EWK (most sold), EWN (most sold), RGLD, WPM, SAND, SILJ, IDX (some sold), CHK.

I have a significant short position in XLI, a moderate short position in SMH, and a modest short position in CLOU. My cash and cash equivalents including bank CDs and stable-value funds (fixed principal, variable interest) comprise just about exactly 30.0% of my total liquid net worth.

"Those who cannot remember the past are condemned to repeat it" (George Santayana). "Those who can remember the past but insist that it's different this time deserve to repeat it" (Steven Jon Kaplan).

I expect the S&P 500 to eventually lose more than two thirds of its value from its all-time top, whether that level has or hasn't already been reached, with its next bottoming pattern occurring with frequent sharp downward spikes perhaps during the final months of 2020 and into the first several months of 2021. During the 2007-2009 bear market, most investors by Labor Day of 2008 still didn't realize that we were in a crushing collapse, and I expect that at least until around the middle of 2020 most investors will similarly persist in believing that the U.S. equity bull market is alive and well. After reaching its all-time zenith on August 31, 2018, the Russell 2000 Index and most other small- and mid-cap U.S. equity funds have persistently underperformed their large-cap counterparts except before sharp rebounds; similar behavior had ushered in the major bear markets of 1929-1932, 1973-1974, 2000-2002, and 2007-2009. The Nasdaq in 2018-2019 never quite achieved its March 10, 2000 intraday zenith in inflation-adjusted terms and has thereby completed a historic long-term double top. A two-thirds loss from its recent zenith would put the S&P 500 near 1050 and I believe that its valuation will become even more depressed at some unknowable level below one thousand; eventual widespread fear over how much further prices will drop is likely to be accompanied by all-time record investor outflows from most U.S. equity index funds and U.S. high-yield corporate bond funds before we eventually and energetically begin the next bull market. Far too many conservative investors took their money out of safe time deposits in recent years; the incredibly long bull market has left them completely unprepared for a bear market. The behavior of the global financial markets since August 31, 2018 has been incredibly similar to the behavior in the early stages of nearly all major U.S. equity bear markets going back to the 1790s. In general, U.S. equity bear markets are far more alike than U.S. equity bull markets. Die-hard Bogleheads will probably resist selling until we are approaching the next historic bottom, but when they are perceived to be blockheads and become disillusioned by their method they will become some of the biggest net sellers of passive equity funds. Because so much money exists today in exchange-traded and open-end funds, as they decline in value their fund managers will be forced to destroy shares which will compel them to sell their components, thus depressing prices further and creating more share destruction in a dangerous domino effect. The Boglehead foolishness is especially ironic since Jack Bogle himself aggressively sold U.S. equities in 2000 and again in 2018 shortly before his passing.

“The hardest thing over the years has been having the courage to go against the dominant wisdom of the time, to have a view that is at variance with the present consensus and bet that view.” --Michael Steinhardt

INFLATION BEFORE RECESSION: BUY ENERGY SHARES (August 7, 2019): The media have become obsessed with the belief that the U.S. economy is heading for an imminent recession. A primary flaw in this reasoning is that U.S. equity bear markets for more than two centuries have followed a reliable pattern in which events occur in a certain sequence. This order of operations has a resurgence of inflation occurring well before the U.S. economy experiences negative GDP growth which defines a recession. There are other elements in this sequence which are also consistent and which are repeatedly misinterpreted by investors each time we are in a new U.S. equity bear market, including rallies for commodity producers beginning with precious metals and usually ending with energy. Investors foolishly conclude that "it's different this time" and then the same patterns repeat yet again.

The first, second, and now the third primary stages of a U.S. equity bear market are proceeding precisely on schedule.

On August 31, 2018 the Russell 2000 completed its all-time intraday zenith at 1742.0889. When this index of two thousand out of 3600 U.S. companies began to persistently form lower highs in September 2018 while the S&P 500 continued to set higher highs, it was beginning a pattern which has characterized all major U.S. equity bear markets throughout history. While the Russell 2000 did not exist in 1929, most small- and mid-cap U.S. stocks persistently underperformed their large-cap counterparts from roughly Labor Day 1928 through Labor Day 1929. This was followed by the worst bear market in U.S. history with losses averaging seven out of eight dollars by the ultimate nadir in July 1932. The same pattern repeated several decades later when large U.S. companies including the S&P 500 Index continued to climb into January 1973 while most baskets of small- and mid-cap companies had peaked in 1971-1972. This was followed by the worst bear market since the Great Depression. A dozen years ago the Russell 2000 completed a double top on June 1 and July 9, 2007, while the S&P 500 didn't top out until October 9, 2007 and the Nasdaq reached its cycle high on October 31, 2007. Overall the Russell 2000 during 2007-2009 dropped 60.0% while the S&P 500 slid 57.7% from top to bottom.

Small- and mid-cap U.S. companies have been far underperforming their large-cap counterparts for nearly one year.

The situation during the past year has been eerily similar to the severe past bear markets listed above. From their summer 2018 highs to their Christmas 2018 lows, the Russell 2000 dropped by (1742.0889-1266.9249)/1742.0889 or 27.3%, while the S&P 500 only lost (2940.91-2346.58)/2940.91 = 20.2%. The first pullback in a bear market is almost always followed by a strong rebound, and both of these indices recovered--but by very different margins. The S&P 500 repeatedly set new highs in 2019 until it achieved a new all-time top of 3027.98 on July 26, 2019. The Russell 2000 never got anywhere near its prior-year high, only reaching 1618.37 and doing so on May 6, 2019 to continue its pattern of peaking ahead of the S&P 500 and at significantly lower highs. My essays regarding this topic on SeekingAlpha.com drew derision from some who were either ignorant of history or who refused to believe that this kind of underperformance was a reliable signal of a severe bear market. The recent sudden slide has finally gotten some people to realize that, alas, we could be in some kind of downtrend after all. The media have created the illusion that the latest U.S. stock-market pullback was caused by Trump, tariffs, earnings, employment data, and other allegedly unpredictable events. However, the Russell 2000 has been screaming loudly and clearly that a major loss would have to happen relatively soon. Because valuations were so much higher in 2018-2019 than they had been in 2007, the overall percentage losses will be proportionately greater, probably exceeding two thirds from top to bottom for nearly all U.S. equity indices. However, most of these losses will occur during the final months of the bear market, and not before several other key developments occur which I will list below.

The U.S. dollar just began to retreat from its highest level since May 2017. As the greenback grinds lower, this will be inflationary rather than recessionary. A U.S. recession won't occur until the U.S. dollar begins to sharply rebound from multi-year lows versus most global currencies.

The U.S. dollar has generally acted strongly, reaching 98.932 on Tuesday, August 1, 2019 which marked its most elevated point in over 26 months. The strong U.S. dollar has encouraged investment into all U.S. assets including stocks, corporate bonds, Treasuries, and real estate, while discouraging investment into commodity-related assets and non-U.S. stocks and bonds which tend to correlate inversely with the greenback. Just as bear markets reliably feature small- and mid-cap U.S. stocks underperforming large-cap shares, they also tend to experience substantial losses for the U.S. currency versus most other global currencies during the middle of the bear market. During the 2007-2009 bear market which began with the Russell 2000's first peak on June 1, 2007, the U.S. dollar index slumped to its all-time bottom of 70.698 in March 2008, and after briefly rebounding, retreated again to complete a double bottom at a slightly higher low in July 2008. Thus, the greenback moved dramatically lower for roughly one year. During this time all of the following occurred: commodity producers were among the world's strongest equity sectors; many emerging markets rose while U.S. stocks mostly moved lower; and inflation--which was widely considered in the middle of 2007 to be subdued and irrelevant--became unexpectedly widespread.

The major inflationary bout of 2008 has already been forgotten by most investors, and almost no one recalls similar surges in years including 1973, 1948, and 1937. The same phenomenon is about to occur again as precious metals are warning us.

By the final months of 2007 gold, silver, and related assets had been climbing strongly since June 2006 but their message was generally ignored. In early 2008 agricultural prices rose so suddenly, and by hundreds of percent apiece. My local bakery posted futures charts for the only time in their history on their front window to show customers that they weren't profiting from their sharply higher prices. In India they actually banned the export of rice until they discovered that tons of rice were rotting in warehouses. By July 2008 almost everything else had been soaring in price including a new all-time peak for gasoline and most energy products. In the current cycle, after having fallen to a 2-1/2-year bottom on September 11, 2018, precious metals and their shares have been among the top-performing sectors. This has significant inflationary implications which so far have been muted largely because of the strong U.S. dollar. As the greenback retreats, inflationary pressures will become increasingly evident and will eventually crowd out the current obsession with an imminent recession. Before we have anything resembling negative U.S. GDP growth we will have consumers complaining about high prices for gasoline, food, and many other essential goods and wondering if the inflationary spiral will get much worse.

During the current phase of the U.S. equity bear market the biggest percentage gains often occur in whichever commodity-related and emerging-market assets have become the most depressed and oversold.

Energy shares have become among the least popular areas for current investment. Exchange-traded and closed-end funds in this sector including XES (oil/gas equipment/services), FCG (natural gas producers), OIH (oil services), and PSCE (small-cap energy) are enormously below their respective January 2018 highs with many of them losing over half their value. Several of these are commission-free with some brokers including RYE (equal-weight energy) having zero commissions with E*TRADE and Schwab while IEZ (oil equipment/services) and FENY (energy index) are commission-free energy funds at Fidelity. Only alternative energy funds including TAN (solar) and FAN (wind) have been relatively strong, almost certainly due to the increased popularity of "green" investing strategies. As the prices of energy shares have experienced extended pullbacks, many investors have been selling primarily because they see others selling and as their persistently sliding valuations make them emotionally seem to be inherently inferior. This has encouraged huge net outflows from most energy funds. At the same time, top corporate energy executives recognize the irrationally low prices and have been making the most intense insider buying in this sector since their previous deep bottoms of late 2015-early 2016 and late 2008-early 2009. No matter how many times in the past energy shares have doubled or more during their periodic bull markets, investors inevitably conclude that "it's different this time" and only participate after most of the gains have already been achieved.

The traders' commitments for natural gas show an unusually rare commercial net long position--observe the dramatic shift indicated by the maroon bars in the following chart:

Traders' Commitments, Natural Gas

Commercials are those who actually use an asset in their line of business, versus speculators and other investors who only use it for trading.

Numerous other non-precious commodity producers have also been trading not far above multi-year lows.

Other exchange-traded funds of commodity producers including COPX (copper), REMX (rare earth), LIT (lithium/battery), and WOOD (timber/forestry) have become simultaneously depressed, and I have been gradually accumulating these for the first time since around Christmas 2018. Insiders have been buying at these producers including executives with proven long-term track records of making money on these trades including FCX insiders. The traders' commitments for copper highlights a sharp shift toward the commercial net long side in recent months:

Traders' Commitments, Copper

Numerous other sectors also tend to rally at this point during a U.S. equity bear market, usually for somewhat less than one year overall.

Other exchange-traded funds which tend to rally strongly when the U.S. dollar is retreating and when the Russell 2000 is mired in a lengthy bear market include SEA (sea shipping) and SLX (steel manufacturing) along with many emerging-market stock and bond funds. Country funds including NORW (Norway) and GXG (Colombia) correlate positively with energy prices due partly to their above-average concentration in the energy industry.

No worthwhile investment lasts forever, but rising inflationary pressures are likely to continue into somewhere around the middle of 2020.

When top corporate insiders aggressively buy into any sector, as energy executives have been doing, they do not expect a rapid recovery and a quick profit. They must hold their shares for more than six months in order to qualify for favorable treatment. Timing is always unknowable, but it is likely that energy shares and other inflation-loving assets will rally--with several sharp pullbacks whenever momentum players have recently chased after any of these--until the late winter, the spring, or possibly the early summer of 2020. Watch the U.S. dollar's behavior, insider activity, and net fund flows as valuable clues as to when to sell. Eventually the U.S. dollar will begin to rebound unexpectedly from multi-year lows versus most currencies, while top executives become heavy sellers of their shares and several funds enjoy huge net inflows. This will signal that the most knowledgeable participants are getting out just as the public--as always--eagerly piles in during a major topping pattern. Just as you will be buying energy shares now when everyone you know is bailing out of them, you will be closing out your positions when your friends are asking you which ones you own because they don't want to miss out.

U.S. stocks, bonds including corporates and Treasuries, and real estate will all mostly move lower during the upcoming year and then except for U.S. Treasuries will plummet dramatically lower during the following year.

During most of the upcoming year, nearly all U.S. assets including stocks, corporate bonds, Treasuries, and real estate will choppily decline significantly more than most investors are currently anticipating. This won't have anything to do with recession, but due to these assets having become irrationally popular and very overvalued relative to historic norms. The only time in history that U.S. real estate was more overpriced in some regions was in 2005-2006 and prices have already been falling--in some cases for more than a year--in an increasing number of U.S. neighborhoods. U.S. stocks overall were only higher in relative terms at the very end of 1999 and the beginning of 2000, while U.S. high-yield corporate bonds have never been more overpriced than they had been in July 2019. One defining feature of the upcoming year is how U.S. assets of all kinds will be moving lower except during swift rebounds from intermediate-term bottoms, while they are gaining in most other parts of the world and in commodity-related sectors.

Long-dated U.S. Treasuries will likely decline sharply for roughly one year as the current recessionary obsession is replaced by fears of continued inflationary increases.

The yields on the 10-, 20-, and 30-year U.S. Treasuries have plunged to absurdly low levels due to misplaced concerns about an imminent U.S. recession. As investors progressively realize that inflation is a more serious presence and that the anticipation of recession had been premature, the Treasury curve will steepen while long-dated U.S. Treasury yields will likely climb to multi-year highs at some point during 2020. This means that we will have substantially higher U.S. 30-year fixed mortgage rates which will put additional downward pressure on current overvalued and mostly unaffordable U.S. real estate.

Starting sometime in 2020 we will experience the worst part of the current bear market, probably continuing into some part of 2021.

Beginning sometime around the middle of 2020 and continuing probably into the first several months of 2021, assets worldwide will mostly plummet except for a tiny number of safe havens including the U.S. dollar and U.S. Treasuries.

Summary: eventually we will suffer a severe recession, but first inflation has to run its course.

Between now and roughly the spring of 2020, global equities and commodity producers will mostly climb--some quite sharply--while U.S. stocks fluctuate in both directions while mostly losing value. The current correction for U.S. equity indices will likely result in overall losses which are greater in percentage terms than their declines during the final months of 2018. These will probably be followed by strong rebounds into some part of 2020, not that different from what we experienced after Christmas 2018 but following a somewhat different timetable. Just as had been the case earlier in 2019, investors at some point during the first several months of 2020 will mostly conclude that we just had another correction but that U.S. stocks remain in a strong bull market. Once again the persistent pattern of lower highs and underperformance of the Russell 2000 and other baskets of small- and mid-cap U.S. shares won't be taken seriously. The U.S. dollar will keep dropping until around the middle of 2020. At that point we will suddenly experience a sharp rebound for the U.S. dollar, renewed losses for U.S. stocks and corporate bonds, and accelerated declines for U.S. real estate. Only at that point will we finally enter a deep recession.

The bottom line: inflation will precede recession. Especially now that everyone is obsessed with an allegedly slowing economy, it will likely become overheated sometime during 2020.

U.S. recessions are almost always preceded by powerful inflationary surges. This was just as true in 1937, 1948, 1973, 1980, 1990, 2001, and 2008 as it is today. With the Russell 2000 having dropped over 13% in nearly one year from its August 31, 2018 intraday peak (as of its August 6, 2019 close) and the S&P 500 outperforming, this is a typical severe bear market. As the vast majority of investors are expecting a higher U.S. dollar, lower interest rates, lower commodity prices, and lower inflation, we are likely to get the exact opposite just as we have experienced during past U.S. equity bear markets. It always seems different this time but it never is.

Disclosure of current holdings:

From my largest to my smallest position I currently am long GDXJ, 4-week U.S. Treasuries, the TIAA-CREF Traditional Annuity Fund, SIL, XES (many new), ELD, ASHR, FCG (some new), SEA (many new), SCIF (some new), OIH, ASHS, VNM, GDX, bank CDs, money-market funds, GXG, I-Bonds, URA, PAK (some new), SLX (many new), EPOL, EZA, EPHE, LIT, TUR, ARGT, FM, HDGE, ECH, EGPT, MTDR, EWG, EWU, EWI, REMX, EWW, FXF, COPX (many new), JOF, AFK, RSXJ, EWD, EWQ, EWK, GREK, FXB, EWM, CHK, EWN, GOEX, BGEIX, NGE, WOOD (all new), IDX, RGLD, WPM, SAND, and SILJ. I am short a moderate quantity of XLI.

Those who respect the past won't be afraid to repeat it.

I expect the S&P 500 to eventually lose more than two thirds of its value from its all-time top, whether that level has or hasn't already been reached, with its next bottoming pattern occurring with frequent sharp downward spikes perhaps during the final months of 2020 and into the first several months of 2021. During the 2007-2009 bear market, most investors by Labor Day of 2008 still didn't realize that we were in a crushing collapse, and I expect that during the first several months of 2020 most investors will similarly persist in believing that the U.S. equity bull market is alive and well. After reaching its all-time zenith on August 31, 2018, the Russell 2000 Index and most other small- and mid-cap U.S. equity funds have persistently underperformed their large-cap counterparts except before sharp rebounds; similar behavior had ushered in the major bear markets of 1929-1932, 1973-1974, and 2007-2009. The Nasdaq in 2018-2019 never quite achieved its March 10, 2000 intraday zenith in inflation-adjusted terms and has thus completed a historic long-term double top. A two-thirds loss from its recent zenith would put the S&P 500 near one thousand and I believe that its valuation will become even more depressed; eventual widespread fear over how much further prices will drop is likely to be accompanied by all-time record investor outflows from most U.S. equity index funds and U.S. high-yield corporate bond funds before we eventually and energetically begin the next bull market. Far too many conservative investors took their money out of safe time deposits in recent years; the incredibly long bull market has left them completely unprepared for a bear market. The behavior of the global financial markets since August 31, 2018 has been incredibly similar to the behavior in the early stages of nearly all major U.S. equity bear markets going back to the 1790s. In general, U.S. equity bear markets are far more alike than U.S. equity bull markets. Die-hard Bogleheads will probably resist selling until we are approaching the next historic bottom, but when they are perceived to be blockheads and become disillusioned by their method they will become some of the biggest net sellers of passive equity funds. Because so much money exists today in exchange-traded and open-end funds, as they decline in value their fund managers will be forced to destroy shares which will compel them to sell their components, thus depressing prices further and creating more share destruction in a dangerous domino effect. The Boglehead foolishness is especially ironic since Jack Bogle himself aggressively sold U.S. equities in 2000 and again in 2018 shortly before his passing.